Tax and HMRC

The Tradesman's
Guide To CIS.

What actually gets deducted, why, and the mistakes that quietly cost subcontractors the most money.

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This is general guidance for UK contractors and subcontractors under the Construction Industry Scheme, not personal advice. CIS has genuine edge cases, especially around employment status and gross payment status, so check anything specific to you before acting on it.

What CIS actually is

If you're self-employed and working for a contractor in construction, CIS is why money gets taken off your invoice before it hits your bank. The contractor deducts a percentage and pays it straight to HMRC, as an advance against the tax and National Insurance you'll owe for the year, not an extra charge on top of what you already pay.

That deduction only applies to labour. Materials, VAT, and certain other costs on the invoice aren't part of the calculation, so a correctly split invoice matters more than most subbies realise, more on that below.

The three rates

30%

Unregistered

You haven't registered for CIS, or the contractor couldn't verify you. This is the rate you're on by default until you sort registration.

20%

Registered

The standard rate once you're registered and verified. Most subcontractors sit here.

0%

Gross payment status

You're paid the full invoice, no deduction at all, and you settle everything yourself through Self Assessment. See below for what qualifies you.

Verification

Before a contractor pays you for the first time, they have to verify you with HMRC using your UTR and National Insurance number. That check tells them which rate to apply. If you're not registered, or something doesn't match, you default to 30%, which is often the actual reason someone's getting hit with the higher rate rather than anything they've done wrong.

Worth checking your own details are consistent and up to date if you've ever been deducted at 30% without expecting it.

Gross payment status

This is the one most subcontractors don't chase, and it's often worth real money in cash flow, not paying tax twelve months early, invoice to invoice, on top of whatever you owe at year end.

  • Turnover testRoughly £30,000+ a year in labour-only construction turnover for a sole trader (per director, or £100,000 total, for a limited company).
  • Compliance testA clean record on Self Assessment, VAT, PAYE, and CIS filings for the past 12 months. Late returns or payments can knock you out of this even if your turnover easily qualifies.
  • Business testYou need to be running genuine construction work in the UK through a business bank account.
Worth knowing From April 2026, HMRC has stronger powers to cancel gross payment status immediately, and block you reapplying for five years, if a payment is connected to deliberate non-compliance somewhere in the chain. Keeping your own compliance record spotless matters more than ever, even if the issue originates with someone else you're contracted to.

Monthly returns and deadlines

If you're the one paying subcontractors, not just receiving CIS deductions yourself, you're responsible for filing a monthly return (the CIS300) with HMRC, covering every payment made that month.

  • Return filedBy the 19th of each month, covering the tax month just ended.
  • Payment to HMRCBy the 22nd if paying electronically, the 19th if paying by post.
  • Statement to the subcontractorA written statement of what was deducted, within 14 days of the tax month ending.

Costly to get wrong

  • Missing a monthly return, even with nothing to report, can trigger a penalty
  • Getting the employment status declaration wrong on a return can mean a penalty of up to £3,000
Often missed CIS deductions are only ever an advance, not a final bill. If you've had tax deducted all year and your actual liability comes out lower once your expenses and allowances are counted, the difference is refunded to you through your Self Assessment, or offset through PAYE if you're a limited company. Plenty of subcontractors never claim this back because they assume what's deducted is what they owed.
Also often missed Deductions apply to labour only. If a contractor deducts CIS on the materials portion of your invoice too, you're being overcharged, and it's a common invoicing mistake on both sides. Splitting labour and materials clearly on every invoice protects you either way.

Not sure what rate you're on?

Send over your last few payments and we'll check whether you're being deducted correctly, and whether gross status is worth chasing.

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This guide is general information for UK contractors and subcontractors under the Construction Industry Scheme, correct at the time of writing, and isn't personalised tax advice. CIS rules, thresholds, and penalties can change, and your own circumstances may differ, always check anything you're unsure about before relying on it.

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